The Clock Is Ticking: How Much Oil Will Iran Lose?

Those energy analysts who are not yet bored to death with the whole Iran business must be having a field day making forecast after forecast about how many barrels the country will lose following next Monday’s snap-back of U.S. sanctions. There is a lot of space for speculation and guesswork, and even those who are wary of making shocking forecasts don’t have a lot of facts to work with. Yet it’s been six months since President Trump announced the sanctions, and since then a lot of data has accumulated—and is still coming in—suggesting that the initial shocking forecasts of losses of between 1.5 and 2 million bpd in Iranian exports were slightly exaggerated.

Data compiled by ClipperData and reported by the Energy Information Administration, for one thing, suggests that Iran exported a little less than 2 million bpd in September. That’s the same month when there was a flurry of media reports about sharp drops in Iranian exports based on conventional tanker tracking, suggesting that Iran had lost as much as 1 million bpd in outbound shipments. As the ClipperData figures—and regular updates based on satellite imaging from TankerTrackers.com—show this is not the actual case.

While Japanese and South Korean refiners said publicly that they have stopped all Iranian oil purchases ahead of the sanctions—in hopes of securing a waiver from the U.S. Department of Treasury—China and India continued guzzling Iranian crude in substantial amounts. China bought about 440,000 bpd of Iranian crude in September, ClipperData estimated, with India importing 576,000 bpd. That’s down from the average for the first half of the year but not dramatically: the H1 average for China was 644,000 bpd and for India it was 554,000 bpd.

Just yesterday, TankerTrackers.com reported almost all Iranian oil tankers in the Persian Gulf have now switched off their geolocation devices and were moving around “back and forth between ports to create confusion.”

This basically means the market would have to wait for at least a couple of weeks after November 5 to get any relatively reliable data about how Iranian exports are faring amid the sanctions. Even so, some analysts are once again predicting losses of 1-1.5 million bpd.

Iran, meanwhile, is preparing. Earlier this week media reported that President Rouhani had replaced the economic team of the government and that four cargoes of crude were sold on the Iranian energy exchange. The amount is not a great one at less than 300,000 bpd, but it could be the start of something regular. Related: OPEC's Radical Strategy Change After The Midterms

The idea for the exchange is to have private local entities buy the crude and then resell it to foreign traders. Analysts accurately point out that this would still put the foreign entities on the hook for penalties from Washington, as doing business with Iranian entities would constitute a breach of the sanctions. Yet smugglers would hardly care about Iranian sanctions, so there is a good chance that illegal entities would make use of this option.

At the same time, Washington is looking into waivers, according to a State Department spokeswoman who spoke to S&P Global Platts this week. "Our goal remains to get to zero oil imports from Iran as quickly as possible. We are prepared to work with countries that are reducing their imports on a case-by-case basis."

Although the two parts of this statement are kind of mutually exclusive, chances are even the most hawkish hawks in the Trump administration have realized that they do not have complete control over who buys Iranian crude, and there is such a thing as a black market that Iran must be familiar with given its past sanction experience.

By Irina Slav for Oilprice.com

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